The Chief Executive of KiwiSaver provider and fund manager Pathfinder says investing ethically is the way of the future and bigger KiwiSaver providers need to jump on the bandwagon.
“Our mission is to mainstream ethical investing. We have to get the big providers excited and get them on board with it,” John Berry told interest.co.nz.
Pathfinder specialises in ethical investing, emphasising environmental, social, and governance (ESG) criteria to deliver positive financial returns alongside social and environmental benefits.
Berry and Paul Brownsey co-founded Pathfinder in 2009 and then launched its first sustainable equity fund in 2010. In 2019, Pathfinder launched its first KiwiSaver fund.
Berry says changing the mindset around what it means to invest ‘ethically’ is key as the thinking in New Zealand when it comes to ethical investing has generally been about what to avoid.
Thinking about what’s on the avoid list – maybe it's weapons, maybe it’s tobacco – is important in the sense that it aligns your investing with your values, Berry says.
But if you want to drive change in the world, he believes just avoiding companies or industries that go against your personal values is a slower, longer approach to driving that change.
“[A] bigger way to drive change is to flip it on its head and say, 'okay, well, I've avoided these companies, but where do I actually put my money?' And that for me is a much more interesting question,” he says.
Berry identifies five layers of ethical investing: exclusions, better companies, sustainable themes, engagement and calls impact investing the “new frontier” of ethical investing.
Impact investing involves funding generally private companies to achieve both social or environmental goals and financial returns.
Berry highlights Pathfinder's investments in Lodestone Energy’s solar farms, Mint Innovation’s clean technology, and Community Finance’s social housing as prime examples of Pathfinder’s own impact investing.
“I'm just a really strong advocate [that] KiwiSaver should be in the private asset space. But there’s too few KiwiSavers doing it,” he said.
“We’re putting capital into New Zealand businesses and into social housing and different things that will make money for our investors but also be positive for the environment and for people. But we should be doing more and we can be doing more as a country, as a KiwiSaver scheme.”
How much has the KiwiSaver industry changed since Pathfinder started its KiwiSaver in 2019? Berry says a lot.
“I think there's a massive mindset change going on at the moment,” he says.
“For me, the big thing that we're going through at the moment is a mindset, change and acceptance that raw capitalism is not working as well as it should and as well as it needs to, frankly.”
$750 million
In 2019, the same year that Pathfinder launched its first KiwiSaver fund, Berry and Brownsey sold Pathfinder to NZ-owned wealth management company Alvarium.
Berry is still CEO of Pathfinder while Brownsey left his role as Pathfinder’s Chief Investment Officer in February this year.
Alvarium manages just over $2 billion of assets and within that Pathfinder makes up $750 million, inching closer to the $1 billion funds under management (FUM) mark.
Berry says that $750 million is split “exactly down the middle” between managed and KiwiSaver funds, with $375 million currently in each category.
He says Pathfinder has experienced “significant” growth since launching its KiwiSaver in 2019 as then they had $100 million FUM.
Pathfinder also now has nearly 10,000 KiwiSaver members as well.
The next steps for Pathfinder include launching an aggressive KiwiSaver fund and driving more attention to ethical investing in the industry.
“We’re really clear that we want to not only lead in ethical investing, we want to bring the industry with us and we want to change practices in the industry and drive the industry harder,” Berry says.
“We need to keep doing this and we want to do it in a way that gets other people in the industry, the banks and everyone else in the industry excited.”
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